Budget slip and slide

The amount of fine print and having to read between the lines is the least in this time’s Budget, which has a lot for the markets, but Dalal Street saw the usual jitters after the FM’s presentation on Saturday

The Union Budget saw the market gyrating and swinging wildly. The markets when Finance Minister Arun Jaitley ended his speech were up with the Sensex positive some 150 points or so. In the next 10 minutes or so they were negative and the low of the day was made at 13.23 hrs with the markets down 330 points on the Sensex.

A display board shows the share prices at the Bombay Stock Exchange (BSE) building in Mumbai on Saturday during the Union Budget 2015-16 presentation in the Lok Sabha. Pic/ PTI

This was entirely led by ITC which nosedived from Rs 408 to Rs 360 and made a low of Rs 350 for the day before recovering to close at Rs 361.25. Clearly, the major negative for the market was indeed the higher incidence of excise duty on ITC. Markets closed positive for the day and the week with the Sensex gaining 130.09 points or 0.54 per cent to close at 29,361.50 points.

The Railway Budget was shown live on the television screens at CST station. Pic/ Bipin Kokate

The Nifty gained 68.25 points or 0.77 per cent to close at 8,901.85 points. The BSE100, BSE200 and BSE500 gained 0.72 per cent, 0.55 per cent and 0.44 per cent respectively. BSEMIDCAP lost 0.23 per cent while BSESMALLCAP lost 1.410 per cent.

Investors look expectantly at the screens at Dalal Street as the markets react to the Union Budget

Budget gainsThe top sectoral gainer was BSEBANKEX up 3.29 per cent followed by BSEREALTY 3.21 per cent and BSECAPGOODS 2.48 per cent. The top loser was BSEFMCG down 4.48 per cent followed by BSECONDUR 2.53 per cent and BSEMETAL 0.67 per cent. In individual stocks, the top gainer was Axis Bank up 9.36 per cent while the top loser was ITC down 8.75 per cent.

During the course of the last week, we saw February futures expire on Thursday at 8,683.85 points a loss of 268.50 points or 3 per cent. The very next day we saw a huge rally after the economic survey and clarity on the Railway Budget on where they would get resources needed for the growth of the railways became clearer. At the end of the normal week, markets were just about flat despite a huge 474 point rally on Friday. The gains of Saturday were the net change for the week.

Budget has come and gone and it will be life as usual at the markets from today onwards. Going forward we would have corporate performance being the key driver for our markets. The Budget may or may not have satisfied all people but as mentioned in my column yesterday has a lot for the markets.

The FM knows that money for investment will come from FIIs and they are indeed very bullish on India and want transparency which has been provided. In so many years of reading the Budget the amount of fine print and having to reads between the lines is the least this time. A couple of key takeaways which will be the drivers of the market in the year to follow are from my perspective as follows.

First, the impetus given to infrastructure and the issuance of tax free bonds for the growth of roads, railways and ports. Secondly, the bankruptcy law which will facilitate recovery and benefit banks and NBFC’s. Thirdly, the federal nature of this budget where the state’s share has gone up significantly and lastly the figure of divestment of R 69,000 crores which also includes strategic stake sale of Hindustan Zinc, Balco and SUUTI.

Impetus for investorsThe message is loud and clear that opportunities to invest in India are available to all types of investors whether they are domestic or foreign. Investment in types of securities has also opened up with tax pass through status being provided in case of AIFs (Alternate Investment Funds) and REITs (Real Estate Fund).

The issue of tax laws depending on country of residence of fund manager has been resolve. GAAR has been deferred by two years and would be with prospective effect alone. For the domestic investor tax free bond issues will happen and the target is about Rs 70,000 crore.

Everything that could be expected from an investor’s perspective has been done. Pension funds are expected to come to India and invest as well. Probably the exemption for investment in National Pension Fund could be linked to this.

What should an investor do? Things look good but the caution would be that corporates need to improve their performance. A launch pad has been provided by the Budget and if properly used we have all that is required to take off and then start reaping the fruits. FIIs are bullish on the country, are happy with the political scenario and crude prices are helping us.

With subsidies easing the fiscal deficit and economy growing we just need corporate performance to start doing the uptick. Look for performing companies and make medium term commitments to the market. There is enough money to be made for one and all and just resist those short term trades and tips.

Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd. Readers are invited to read more about these and other issues on his website http://ak57.in

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